Master Direction – RBI (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023
The Reserve Bank of India has come out with Master Directions governing norms related to acquisition and holding of shares in banks to ensure that their ultimate ownership and control remain well diversified and the major shareholders are 'fit and proper' on a continuing basis. The provisions of these directions shall apply to all banking companies (as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949), including Local Area Banks (LABs), Small Finance Banks (SFBs) and Payments Banks (PBs) operating in India.
As per the Master Direction, any person who intends to make an acquisition which is likely to result in major shareholding in a banking company is required to seek prior approval of the Reserve Bank by submitting an application and the decision of the RBI to (a) accord or deny permission or (b) accord permission for acquisition of a lower quantum of aggregate holding than that has been applied for, shall be binding on the applicant and the concerned banking company.
It further said permission of the Reserve Bank to acquire shares or voting rights in a banking company for non-promoter will be limited to 10 percent in case of individuals, non-financial institutions, and financial institutions connected with large industrial houses. The limit is 15 percent in case of financial institutions, public sector undertakings and the government. In case of promoter, the limit has set at 26 percent of the paid-up share capital or voting rights after the completion of 15 years from commencement of business of the banking company.
